Credit card processing fees are a cost of doing business in today’s world, although they don’t have to be any higher. For most businesses, this expense can eat profit considerably, factoring into the profitability mix as a normal and unappealing part of doing business efficiently and with healthy profit levels. Understanding what cutting them means to your business will be the key steps in improving your bottom line and making your financial model a sustainable one.
Protect Profit Margins
The primary reason to cut credit card processing fees is to improve your profit margins. A small fee is levied on every credit card transaction, usually between 1.5% and 3.5% of the purchase amount. This does not seem such a big deal to any individual. However, such fees accumulate over time to place a heavy burden upon a business that is carrying out a high number of transactions. For smaller businesses, such small fees may be the difference between profit and breaking even. By reducing credit card processing fees, you are reducing all the money taken from your every sale, leaving with maximum revenue that will maintain healthy margins.
Lowering Operating Costs
Reduced processing fees lower your total operating costs, and this is what maintains financial well-being in business. There are also other fees like charge-back fees, statement fees or batching, and many businesses just don’t know what they are paying because of the charges embedded in monthly statements. A reduced operational cost allows your company to spend more in other areas, say in marketing, customer service, or product expansion.
Increased Competitiveness
In the market, any business that can cut the processing fees increases its edge. Pricing will literally make or break your sale, and the ability to be able to keep prices lower without sacrificing your margins is a huge advantage. For example, if you are in an industry in which people are suffering fees, you can use savings from that to provide better deals or run promotions that attract more customers to your business. Over time, this can translate to increased market share and brand loyalty.
Better Customer Experience
Cutting down credit card processing fees directly benefits your customers. Many businesses pass these costs along to their customers by adding surcharges for credit card payment. That is unappealing to your customers, who might find the extra charge unfair or inconvenient. Offering flexible, fee-free payment options may attract more customers as they are attracted by choices of payment options, especially at times of economic stress.
Growth Planning
As the business grows, so too do your transaction volumes, and so too will the impact of these credit card processing fees in your finances. Learn how to minimize these fees early on, even if such is considered a minor issue when piling up. Many payment processors offer scalable solutions that can help you negotiate lower fees as your transaction volume increases. Preparing ahead of time to reduce your fees puts your business on the right track for long-term growth and survival. This will ensure that when you make more sales, your profit margins continue to be protected so climbing credit card processing fees won’t sneak up on you as that sales volume increases.
Conclusion
Low processing fees for credit cards are necessary tools for business survival in the preservation of margins and in lowering the cost to operate. By reducing these fees, businesses are placed in good financial positions and experience better customer service. The more the business grows, the more imperative it would become to cut down on the processing fees to sustain the business model.
